A New Twist on Greece’s Old-Style Dysfunction

A complex scandal signals Syriza is reviving the government-bank-media axis the party once campaigned against.
By YANNIS PALAIOLOGOS
Sept. 28, 2016 3:54 p.m. ET

The Wall Street Journal

There’s been a lot of hand-wringing in Europe about the rise of right-wing populism, about the clampdown on media freedom and judicial independence in places such as Hungary and Poland. But Greece’s populist government, led by the hard-left Syriza party, seems to share many of the same authoritarian instincts of its formerly communist partners, whose values Syriza claims to abhor.



On Sept. 15, corruption prosecutors in Athens raided the advertising business of Lina Nikolopoulou-Stournara, whose husband, Yannis Stournaras, is the governor of Greece’s central bank. The raid was ostensibly part of an investigation into funds allegedly misused by KEELPNO, Greece’s centre for disease control.

But this raid had been ordered by the corruption prosecutor, Eleni Raikou, and not the magistrate responsible for the case, which is highly irregular. It occurred merely a few hours after Mr. Stournaras had notified the government that he was vetoing its picks for key positions, including the CEO and chairman, of the board at Attica Bank. Attica is a troubled lender closely linked to the construction sector. Mr. Stournaras further declared that until the leadership question was resolved (as it since has been, on his terms), all lending by Attica Bank would be frozen.

Mr. Stournaras has long been the villain in Syriza’s version of the Greek crisis. Their first skirmishes came when, as minister of development in the country’s caretaker government from May to June 2012, Mr. Stournaras tried to push through a number of major investments. Syriza accused him of attempting a “political coup d’etat.”

Then, in March 2014, as finance minister of the conservative-led government under Prime Minister Antonis Samaras, Mr. Stournaras was subject to a vote of no confidence initiated by Alexis Tsipras, at the time the leader of the opposition. Mr. Tsipras called Mr. Stournaras “the main executor of the contract on the life of the Greek economy and Greek citizens.” The motion failed.

When Mr. Tsipras became prime minister, his top associates, including Yanis Varoufakis, the former finance minister, continued to vilify Mr. Stournaras as the enemy within, constantly opposed to the confrontational negotiating strategy adopted by the first Tsipras government.

In May 2015, a pro-government newspaper published an email from Mr. Stournaras’s spokesman to a journalist outlining the dire straits of the economy, though neither the spokesman nor the journalist was the source of the information. Instead of being troubled by the way in which the newspaper had obtained this private communication, Syriza ministers demanded Mr. Stournaras’s resignation for undermining the government’s efforts. At the height of the negotiation crisis, Zoe Konstantopoulou, the house speaker, even pressed Mr. Stournaras to appear before Parliament, threatening to use force if necessary, to answer for various actions of the Samaras government.

Mr. Tsipras’s surrender to Greece’s creditors in the summer of 2015 seemed to usher in a new era of peace between the government and the central bank. Alas, the truce was short lived. The seeds of the latest showdown were sown in October when Yannis Dragasakis, the moderate deputy prime minister, revealed in Parliament the government’s new lending strategy and nonsystemic Attica Bank’s role in that plan: “What is needed is the creation of a parallel banking system that will not be under the supervision of the European Central Bank,” he said.

Attica Bank was then recapitalized in December, largely through new money invested by the civil engineers’ pension fund, which holds a controlling interest in the bank, but also through large injections from companies in which a major stakeholder was the state. It was widely reported in Greek media that this occurred after government ministers leaned on their executives.

Those investments, which have since lost more than 80% of their value, still weren’t enough for Attica to become adequately capitalized. The shortfall, close to €70 million ($78 million), led to an investigation by the Bank of Greece and the European Central Bank. The findings have yet to be made public, but according to Greek media reports, they include widespread lending with inadequate collateral. Attica’s nonperforming-loan ratio reached as high as 57%.

This is what led to Mr. Stournaras’s veto. As for the government’s furious reaction, including a front-page attack on Mr. Stournaras by the Syriza party organ, press reports and most opposition parties attribute it to the fact that the bank has lavishly financed the construction-business interests of Christos Kalogritsas, a source of funding that hit its peak during the Syriza era as the country was hurtling toward capital controls. Most of Mr. Kalogritsas’ business is related to public-sector contracts. He has not commented on the matter.

Moreover, Mr. Kalogritsas’ son, using a letter of credit from Attica Bank, was recently awarded one of four broadcast licenses auctioned by the government at a cost of €52.6 million. Critics, including Defense Minister Panos Kammenos, who is also the leader of the government’s junior coalition partner, have questioned whether the younger Mr. Kalogritsas (whose own son’s godfather, Christos Spirtzis, is the minister of infrastructure), has the money to cover the license. On Monday, under pressure from the revelations about Attica Bank and unable to pay the first installment of the money on time, Mr. Kalogritsas lost the license.

Despite this, it seems the old triangle of government, banks and media owners, which Syriza made so much of combatting, isn’t about to go away. Especially since it appears that the new governing party is less keen on dismantling the old system than simply replacing its players with new ones closer to its own heart.

Mr. Palaiologos is a journalist at the Kathimerini newspaper. The second edition of his book “The Thirteenth Labour of Hercules” was published in July (Portobello Books).